A Fairer, Simpler Way To Raise Money: Income Tax

August 10, 1987|By Robert E. Meale

Florida needs money for roads, schools, prisons and other pressing capital improvements. The state's growing service economy should not go untaxed. The new service sales tax meets these objectives. But a personal income tax would be a fairer, simpler way to raise the needed money.

The service sales tax is imposed on consumers, not providers of services. The tax directly increases the cost of services, in many cases by more than 5 percent because of the pyramiding of the tax two or three times on the same transaction.

An example of pyramiding occurs when a lawyer pays a court reporter $500 plus $25 tax, and then must collect taxes not only on his legal bill of $1,000 but again on the $525 paid to the court reporter.

The service provider often must absorb the service sales tax by lowering the price of the service. The tax in this case resembles a tax on the provider's gross income without deductions.

A personal income tax -- based on the federal tax -- would be cheaper to pay. A state income tax is deductible on our federal income tax returns, so a tax of $100 would cost about $80. The sales tax no longer is deductible, except for businesses. By enacting the service sales tax rather than a personal income tax, Florida has rejected a federal subsidy that is sensibly exploited by 45 other states, including all of our Southern neighbors.

A personal income tax would be cheaper to comply with. The annual tax return could be prepared once a year in about five minutes. In contrast, the service sales tax must be calculated on each transaction and requires extra paperwork for many transactions. This is a serious burden to the service provider. And consumers normally will bear the added costs of compliance when businesses must hire more accounting personnel and make expensive modifications to computing systems and invoices.

A personal income tax would be easier to enforce. Florida could piggyback onto the vast resources of the IRS; now the state goes it alone with the service sales tax. As a practical matter, the use tax imposed on service transactions performed out of state is difficult to enforce. This leaves Florida service providers at a competitive disadvantage with their out-of- state counterparts.

A personal income tax would be fairer. The Tax Reform Act of 1986 eliminated tax shelters and strengthened the minimum tax that all must pay regardless of their regular tax deductions. The inequities are far greater in the service sales tax, which is not only expensive and difficult to comply with and enforce, but also regressive. Unlike an income tax, the service sales tax is not based on the taxpayer's ability to pay.

A personal income tax requires voter approval to amend the state Constitution, and few believe that Floridians will ever approve such a tax.

Maybe not. But I know a lot of manufacturer's representatives, attorneys, contractors, consumers and business people who would at least like the chance.